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Why bother with bankruptcy? Katharine Lawrenson, a Solicitor and Partner at DWF LLP,

looks at the reasons why creditors should not always overlook bankruptcy in their quest to get paid.

The Recognised Standard / www.cicm.com / September 2018 / PAGE 40

CREDITORS often don't 'bother with bankruptcy' because of the cost and time it takes. Bankruptcy is commonly dismissed as an option when it can be a

very useful tool in the armoury of a credit manager.

I have specialised in personal insolvency for 26 years and as I wear many hats, I encounter conflicting views on bankruptcy. In heading up our Creditor Services team I assist creditors in managing their insolvent portfolios, but I also act for Insolvency Practitioners when they are appointed as Trustee in Bankruptcy.

Acting for clients on different sides of the same fence means that I am alive to what the other party will be considering in terms of options and risk. This allows me to provide my clients with the best possible all-round advice. It also means that I see cases where bankruptcy should have been used where it has not and where bankruptcy should never have been considered.

Bankruptcy can take time, be expensive and is without guaranteed recovery. However, it can also be incredibly effective if used properly, particularly if you take a targeted approach to your portfolio. Many creditors when considering their options often overlook the extensive powers that a Trustee in Bankruptcy has once appointed.

A TRUSTEE CAN: Obtain information, documents and files of papers from banks, lenders, HMRC, insurers and even the debtor’s solicitors, accountants and family members Set aside transactions previously entered into. For example, ‘gifts’ to family members if made within five years or without a time limit if the transaction was to deliberately avoid making payment to creditors Obtain search and seizure warrants, warrants of arrest or issue contempt of court proceedings if the debtor does not co-operate, fails to disclose or conceals assets Publicly examine the debtor under oath Have the debtor’s post re-directed to the Trustee’s office Confiscate the debtor's passport to prevent absconding Deal with all of a debtor's property including foreign assets.

These extensive and some may say draconian powers, supported by criminal sanctions, are much greater than that of a creditor. Consider using them when:

Your debtor is asset rich but cash poor and where an Order for Sale pursuant to a Charging Order may fail due to their personal circumstances or debt to equity ratio Your debtor can pay but won't and you have limited visibility on assets You know that a debtor has or had assets but they are held in a complicated structure, for example in offshore trusts or if you believe the debtor is disposing of assets by gifting, transferring, selling or placing them in trust. You believe your debtor has concealed his assets Your debtor is keen to avoid a perceived social stigma of bankruptcy Your debtor has the ability to raise funds from family or friends to settle the bankruptcy at an early stage. Often seen

where wealthy parents wish to avoid their children from being made bankrupt at a young age Your debtor is keen to avoid a Trustee scrutinising their activities or where you are concerned that a fraud has been perpetrated on you. If a debtor has defrauded you, it is likely that he will have taken time to protect his wealth Your debtor is a professional and needs to avoid bankruptcy for reasons connected to their ability to practice, be part of a partnership or to preserve their reputation.

The return on bankruptcy for creditors can be low and it is not always the most cost effective collection method. However, times are changing. The introduction of the Insolvency (England and Wales) Rules 2016 has streamlined procedures and made a Trustee’s fees more transparent. If they want it, creditors can have more control. The best bankruptcy results for creditors are where they target the right debtor, engage with the Trustee (particularly in relation to fees) and share information. Credit managers often have a lot of information about a debtor and it is surprising that they do not always hand this over to a Trustee on day one.

Even if you are not the petitioning creditor but find yourself as an unsecured creditor, it is worthwhile taking some element of control to get the right Trustee appointed. Trustees have different strengths and capabilities and you should support the one who you think will be best served to get your debt paid.

Given the extensive powers that a Trustee has, I urge you to shake up your portfolio, take a pro- active approach and ‘bother with bankruptcy’.

For more information or a no obligation discussion regarding how DWF LLP can assist you with your personal insolvency needs please contact Katharine.lawrenson@dwf.law

DD +44 151 907 3115 E katharine.lawrenson@dwf.law W www.dwf.law/recover

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